Just two years ago, BuzzFeed News was lauded for its first Pulitzer award for investigative work using satellite imagery to identify the infrastructure built by the Chinese government for the mass detention of Muslims.
Mark Schoofs, then editor-in-chief, described the work — one of a series of award-winning articles that carved out a reputation for pioneering investigative work at the group — as an “example of innovative forensic analysis and creative reporting”.
Schoofs on Thursday took to Twitter with a simple response to the news that BuzzFeed had axed his old news division as part of a drastic plan to slash costs across the business to restore profitability. “Terrible day,” he said.
It was the same day as digital media group rival Insider also laid off 10 per cent of its staff in a battle to keep the company “healthy and competitive”, according to an email from Insider’s president Barbara Peng.
Former staff and analysts said the BuzzFeed decision was a sign of the waning fortunes of a cohort of much-hyped venture capital-backed digital start-ups that had once trumpeted ambitions to disrupt how people were served with news.
Ben Smith, founding editor of BuzzFeed News who now runs media group Semafor, described it to the Financial Times as the end of an era of the sort of “journalism that was built to travel through the pipes of social media, and to cover the internet as a real and important place”.
He said: “People got sick of this form of distribution and of social media in general. What they want now is something more human, more curated, and something that, ironically, is built to help you navigate the chaos of fraying social media.”
The same year that BuzzFeed won its Pulitzer, the company expected at one point ahead of its initial public offering to have an implied valuation of $1.5bn. After the news of the cost-cutting broke on Thursday, its market capitalisation dropped to close to $100mn, leaving investors wondering what was next for the group that had once seemed on an unstoppable rise thanks to its candy-coloured combinations of emojis and listicles.
The last push notification on Thursday from the group read: “BuzzFeed News is logging off with a reminder that blippi pooped on his friend”, a typically clickbait-y reference to an investigation carried out into a YouTube star.
The digital media company reported a $201.3mn net loss last year, compared with a profit of $25.9mn the year before.
BuzzFeed is not alone in struggling to turn news into profits. Vox let go about 7 per cent of its staff at the start of the year. Vice has been exploring a sale that will probably yield a price far below the lofty valuations ascribed by previous fund rounds.
Other news organisations have also laid off staff around the world as the market for advertising tightened and the economy slowed, while the sort of venture capital funders that lossmaking digital start-ups have been reliant on for cash have become scarce since the implosion in the tech sector last year.
Jonathan Miller, chief executive of Integrated Media, which specialises in digital media investments, said that “hype-based models” of digital news will no longer work given investors and shareholders need to see a faster path for profitability.
“What we are seeing is these digital media brands focused on building the type of massive scale they felt was needed to compete for advertising dollars — which is where all their money comes from — [but] they ended up commoditising their offering and lost sight of what made them differentiated and meaningful to begin with,” he said.
He added that “high awareness but lower engagement cannot be a sustainable business model, especially in what has become a tougher economic environment. There’s no free lunch anymore, everything must be earned.”
Analysts say BuzzFeed got the market economics for news wrong. Joseph Teasdale, head of technology at Enders Analysis, said BuzzFeed bet that free journalism distributed by large tech platforms with their wider audiences would bring in profits, but instead, the advertising money stayed with their bigger rivals.
“We are at the end of the tide turning for these groups. They were valued incorrectly as tech groups — making news content is expensive,” he said.
While co-founder Jonah Peretti took responsibility for the losses himself, he also took a swipe at the tech groups that he saw as having used but not rewarded BuzzFeed for its content.
In a memo to staff on Thursday, Peretti said he was guilty of overinvesting in BuzzFeed News “because I love their work and mission so much”, but that this “made me slow to accept that the big platforms wouldn’t provide the distribution or financial support required to support premium, free journalism purpose-built for social media”.
BuzzFeed News was one of the first news outlets built to be largely dependent on the large tech platforms for traffic and referrals, taking advantage of the social strategy that the wider group was built on and designed to maximise reach among a younger generation.
But the company has found instead that these platforms have deprioritised and changed strategies over paying for news, while the market has shifted again with the arrival of other platforms such as TikTok that are upending how younger audiences find and engage with current affairs.
This shift has come against a wider slowdown in the digital ad market, again noted by Peretti in his memo, alongside “a fading Spac market that yielded less capital, a tech recession, a tough economy, a declining stock market”.
HuffPost, which was acquired in 2020, will continue as BuzzFeed’s digital news site.
BuzzFeed was at pains to point out that these job cuts were not linked to any shift to artificial intelligence based content. The company said it did not use AI to generate news content, although AI was used to develop “entertainment content” alongside staff.
Analysts say the future of profitable news is likely to be behind a paywall. “Can you support a digital newsroom just through digital advertising? The evidence suggests not,” said Teasdale.
Other news outlets, such as Semafor, aimed at specific groups of news users have also entered the market.
Miller, who has invested in entertainment and gaming site Fandom and sports site Footballco, says digital platforms will need to focus on building a targeted business that serves a specific interest niche or community.
But for others, BuzzFeed News simply failed to move quickly enough to adapt to the changing digital market. “BuzzFeed News and its editor Karolina Waclawiak made progress to different models,” Smith said, “but ran out of time.”
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